From Mark Ford, editor, Creating Wealth: Last month in the Daily, we published something I wrote for Early to Rise many years ago about Mike Tyson.
During his career, he made hundreds of millions of dollars. But by the time he was 39, in 2005, he was $38 million in debt.
In the original essay, I talked about how he did that: He spent money like a madman, saved nothing, and made foolish investment decisions. I said I understood how that could happen.
When you grow up poor and suddenly begin to make tons of dough, you are tempted to spend your money wildly… both to reward yourself for your success and to show the world that you have “made it.”
Just the other day, I came across an article about boxers Floyd Mayweather and Manny Pacquiao that made the same point. Marc Lichtenfeld, chief income strategist at The Oxford Club, wrote about the match between these two titans. Here’s the excerpt that caught my attention:
Mayweather, whose nickname is “Money,” will earn a guaranteed $120 million. Pacquiao will take home at least $80 million. The numbers are likely to be larger once all of the pay-per-view revenue is counted.
Yet I believe it’s quite possible that both fighters will be broke within a decade.
The match was the richest boxing event in history, but as Marc points out, these guys could see their windfall turn to dust. He says that they, like Tyson, have a tendency to make the following nouveau riche mistakes:
“Investing” in depreciating assets (such as cars)
Spending to impress
Keeping too much cash
He gives some great examples in his article: Mayweather is known to never wear the same underwear twice, for instance. He carries hundreds of thousands of dollars with him at all times, which he entrusts with random members of his entourage. He gambles, avoids taxes, and spends millions on his luxury vehicle collection.
Pacquiao isn’t much better.
He spent $3 million on 900 tickets for his “entourage” to attend the fight. An entourage that size will certainly bleed him dry in no time. Like Mayweather, Pacquiao has big tax problems… the government is sure to come calling in the coming years.
You may aspire to the wealth of these men. But make sure you don’t follow in their same footsteps.
Remember, wealth is a privilege and a responsibility. You must treat it with respect and discipline… or you will lose it.